Bitcoin is still well below $20,000 — so why haven’t Kevin O’Leary, Edward Snowden and other celebrity investors given up on it?
It’s been a tough year for Bitcoin. After hitting an all-time high of $68,789 in November 2021, it’s currently struggling to stay above $16,000.
Some analysts say it’s just a correction for this speculative and volatile asset, while others are much more damning, likening it to a house of cards built on an unsteady foundation.
And yet many famous American investors continue to believe in crypto, with celebrities from all corners like Kevin O’Leary, Edward Snowden, Snoop Dogg and Mike Tyson all encouraging investors to remain bullish through the bear trend.
“It’s like a forest fire,” NSA whistleblower and former CIA contractor Edward Snowden told the crowd at a conference in mid-June. “When the ground has been cleared, things will grow again.”
But some experts aren’t so sure what we’ll find when the ash clears — or if it will clear.
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There’s still huge enthusiasm
Celebrity investor Kevin O’Leary is especially bullish on crypto. In an interview with CNBC in June, he argued the asset has “so much intellectual capacity” and that the “next genius idea” is going to come from the chain community.
“If you go to any graduating cohort, go engineering, a third of them would want to work in the chain. They don’t want to work in the 11 sectors of the economy, they want something new,” the Shark Tank investor said.
O’Leary also reminded viewers that Amazon once saw corrections of up to 50% on a daily basis for 12 years before it transformed into the giant it is today.
Jacob, a crypto enthusiast who only goes by his first name, is a perfect example of the engineers O’Leary referenced who are eager to work in the chain. He works as an engineer on both Web2 and Web3, or the version of the internet most people are familiar with and its next decentralized iteration where applications run on the blockchain or through peer-to-peer systems.
What Jacob says solidified his interest in cryptocurrency is its many uses for the average person, like “real-time money transfers, low transaction fees, high-risk yet attractive investing opportunities, crowd-sourced investing in Web3 companies, and most importantly, digital ownership.”
So why is crypto’s value tanking?
Even with celebrity backers and regular Americans behind it, there’s no denying that crypto’s value has tumbled this year. Patrick Thompson, host of the blockchain and digital asset podcast “More Than Money,” sees a few reasons for this.
The first is inflation. And the economic policy changes governments around the world have passed to combat it likely “sparked the initial sell off in all risk assets,” says Thompson.
And with more and more signs pointing towards the possibility of a recession, those risky assets have become unpalatable for even some moderately risky investors.
This economic instability has also highlighted some flaws in the cryptocurrency industry. Thompson acknowledges that it’s a “house of cards,” adding, “It’s an industry built on an extremely unstable foundation.”
“Many of the biggest companies in the cryptocurrency space had extremely high-risk business models and were over-leveraged,” says Thompson.
But Merav Ozair, a blockchain expert and FinTech professor at Rutgers Business School, says what makes this crypto winter different from previous downturns is that its speculative nature isn’t completely to blame.
“Today, the crypto market is very much correlated and in tune with everything that is happening in the economy and with other asset classes,” says Ozair. “So if everything is suffering, the crypto market will also suffer.”
Thompson adds that offers some important context for why investors pulled out a staggering $453 million from their Bitcoin holdings in a single week in June.
“Why would someone want to hold an asset that will most likely decrease in value in the short term?”
“Sometimes you need to cut off your finger to save your hand, to sell assets now so that your total losses aren’t as detrimental as they could possibly be,” he says.
That’s not deterring investors
Still, Thompson would still describe himself as “optimistic” about crypto — and he’s not alone in that.
A survey from Voyager Digital at the beginning of the year showed about 64% of Americans believed crypto would gain value in 2022, with 37% saying it was moderately or very likely they’d purchase cryptocurrency this year.
About half the participants believe that crypto will be more widely accepted within the next three years.
While blockchain technology has only been around since 2008, Ozair points out that “this has happened in any tech sector at the beginning stages,” citing the internet bubble and the Dot Com crash.
She anticipates the crypto industry will take a similar growth pattern as the tech sector once did when thousands of companies vanished only for big contenders like Google, Amazon and Meta (formerly Facebook) to emerge as the victors.
“[Speculators] probably have confidence that this time around will be no different,” says Thompson.
Innovation from crypto wins hearts and minds
When asked about what he sees in crypto and the underlying blockchain technology, Thompson senses great potential for growth.
“I have seen enterprises use the blockchain in their technology stacks to create solutions that were later sold into legacy industries,” he said.
One example of this he points to is Moody’s recent acquisition of 360kompany AG (better known as just kompany), a platform for global business verification. The move is expected to boost Moody’s “Know Your Customer” capabilities, providing it with even more information about its clients and their individual risk profiles and financial positions.
But not everyone sees the same potential.
Paul Krugman, a Nobel Prize-winning economist and New York Times columnist, has long been a vocal Bitcoin skeptic. Last year, he argued in an NYT column that 12 years in, Bitcoin has failed to live up to the hype.
“By the time a technology gets as old as cryptocurrency, we expect it either to have become part of the fabric of everyday life or to have been given up as a nonstarter,” wrote Krugman.
The crash makes a reset possible
Whatever happens next with this controversial and versatile asset, Ozair says this crash offers a chance to return to crypto’s original purpose.
“It was supposed to help the underserved communities,” she says. “So let’s go back to the roots. Let’s think about how we can create a technology that can help society that can really create a social impact for real this time,” she added.
And she’s not alone in that hope.
“To me, crypto is the final frontier of the American dream for people trying to find socioeconomic mobility in a country where inflation outpaces minimum wage,” says Jacob.
“People forget that crypto was born out of Occupy Wall Street era distrust of the banks and governments to manage our monetary supply appropriately — that is, without collusion.”
Jacob continues his faith in crypto despite having lost 80% of his crypto net worth several times.
“I’m making more money still with the market being down in Web3 than I would be if I was still working in Web2,” he added.
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